• GBP/USD trades near 1.3760 on Friday, down around 0.30% on the day.
• Progress in the US Senate to avoid a government shutdown supports the US Dollar.
• Markets look ahead to US inflation data and the upcoming Bank of England meeting.

GBP/USD trades around 1.3760 on Friday at the time of writing, retreating 0.30% on the day as the US Dollar (USD) regains some traction. The Greenback finds support after reports that the US Senate has advanced a spending agreement aimed at avoiding a federal government shutdown, easing recent political uncertainty.

The US Dollar strengthens after US President Donald Trump and Senate Democrats reached a compromise that would allow funding legislation to move forward. This development reduces near-term fiscal risks and provides modest relief to the US Dollar, which had been under pressure in recent sessions.

In addition, investors remain attentive to reports that Donald Trump is preparing to announce his nominee to replace Federal Reserve (Fed) Chair Jerome Powell, with former Fed Governor Kevin Warsh widely seen as the leading candidate. Market participants generally view Warsh as supportive of central bank independence, limiting downside risks for the US Dollar.

Against this backdrop, the Pound Sterling (GBP) underperforms, struggling to attract buyers despite a relatively calm risk environment. Traders remain cautious ahead of the release of the US Producer Price Index (PPI) later in the session, which could offer fresh clues on inflation dynamics and the near-term outlook for US monetary policy.

On the UK side, attention turns to the next Bank of England (BoE) policy meeting due next week. The BoE is widely expected to keep its policy rate unchanged at 3.75%, following a 25 basis points cut at the previous meeting. Economists generally anticipate that the next rate reduction will not occur before April or June, with the policy rate seen ending the year between 3% and 3.25%. These expectations continue to limit upside momentum for the Pound Sterling against a US Dollar supported by improving political headlines in Washington.